M/S AADYA TRADING AND INVESTMENT PVT. LTD.,NEW DELHI vs. ITO, NEW DELHI

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ITA 2072/DEL/2013Status: DisposedITAT Delhi24 February 2016AY 2009-103 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that de-mat charges recovered from clients cannot be disallowed as expenditure. However, a small disallowance of Rs. 19,024/- was sustained based on the assessee's concession, with the understanding it would not set a precedent.

What were the facts?

The assessee earned dividend income and claimed no expenses were incurred for it. The AO disallowed Rs. 2,87,963/- under Section 14A read with Rule 8D. A significant portion of this disallowance was for de-mat charges, which the assessee had recovered from clients.

What were the issues?

Whether expenses, including de-mat charges, incurred in relation to earning exempt dividend income are disallowable under Section 14A, and if so, how should they be calculated.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, DELHI BENCHES : “A” NEW DELHI

Before: SHRI J.SUDHAKAR REDDY, AM & SHRI A.T. VARKEY, J.M.

O R D E R

PER J.SUDHAKAR REDDY, ACCOUNTANT MEMBER

1.

This is an appeal filed by the Assessee directed against the order of the Ld.Commissioner of Income Tax (Appeals)-IV, New Delhi dated 08.01.2013 pertaining to the Assessment Year (A.Y.) 2009-10.

2.

We have heard Shri A.K.Srivastava, the Ld.Counsel for the assessee and Shri SK Jain, Ld.Sr.D.R. on behalf of the Revenue. On a careful consideration of the facts and circumstances of the case, perusal of material on record, orders of lower authorities, case laws cited, we hold as follows. 3. Ground nos. 3 and 4 are not pressed by the Ld.Counsel for the assessee. Hence they are dismissed as ‘not pressed’. 3.1. Ground nos. 1 and 5 are general in nature which needs no adjudication. 4. This leaves us with ground no.2 which reads as under.

ITA 2072/Del/2013 A.Y. 2009-10 Aadya Trading and Investment P.Ltd. “2. The Ld.CIT(A) has grossly erred in law and on facts in sustaining the addition of Rs.2,87,963/- on account of expenses relatable to dividend income of Rs.1,17,053/- by invoking provisions of S.14A r.w. Rule 8D to calculate such amount of disallowance without appreciating the submissions made by the assessee.” 4.1. The facts relating to ground no.2 are that the assessee has earned dividend income to the tune of Rs.1,17,053/- during the year. The assessee contended during the assessment proceedings that provisions of S.14A r.w. Rule 8D does not apply to the case of the assessee, as no expenses were incurred for earning the dividend income. However, while framing the assessment the AO attributed an amount of Rs.2,87,963/- as expenditure which is to be disallowed u/s 14A of the Act. 4.2. We find that the A.O. has identified the following expenditure as that which is incurred in relation to earning of exempt income. (a) De-mat charges Rs.2,68,938/-: The assessee pointed out that it had recovered Rs.3,36,431/- from the clients towards De-mat charges. This factual submission could not be contradicted by the Ld.D.R. Hence the entire De-mat expenses were recovered from the clients by the assessee. The finding of the Revenue authorities that De-mat charges being expenses directly related to income which do not form part of total income is in principle right. But as the same is recovered, there is no such expenditure incurred by the assessee. Hence a disallowance on this count is bad in law. (b) This leaves us with the disallowance of Rs.19,024/-. The Ld.Counsel for the assessee advanced arguments that the disallowance of this amount is also bad in law. He filed detailed submissions and calculation as per Rule 8D. On a query from the Bench he submitted that he would not press this ground against the disallowance of Rs.19,024/- due to smallness of the amount provided, it is not taken as a precedent for the subsequent years. 4.3. In view of the above submissions we restrict the disallowance of Rs.2,87,963/- to Rs.19,024/-. The assessee gets relief of Rs.2,68,938/-. The concession given by the assessee shall not be taken as a precedent.

ITA 2072/Del/2013 A.Y. 2009-10 Aadya Trading and Investment P.Ltd.

5.

In the result assessee’s appeal is allowed in part. Order pronounced in the Open Court on 24th February, 2016.

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